XPO Logistics, Inc. is one of the fastest growing providers of transportation lo
ID: 373537 • Letter: X
Question
XPO Logistics, Inc. is one of the fastest growing providers of transportation logistics services in North America. It is the fourth largest freight brokerage firm, the third largest provider of intermodal services, the largest provider of last mile logistics for heavy goods, the largest manager of expedited shipments, and the leading provider of premium contract logistics, with growing positions in managed transportation, global freight forwarding and less-than-truckload brokerage. The company facilitates more than 31,000 deliveries a day throughout the U.S., Mexico and Canada.
XPO Logistics has 203 locations and approximately 10,400 employees. Its three business segments - freight brokerage, expedited transportation and freight forwarding - utilize relationships with ground, rail, sea and air carriers to serve over 14,000 customers in the manufacturing, industrial, retail, commercial, life sciences and governmental sectors. The company has more than 3,600 trucks under contract to its drayage, expedited and last mile subsidiaries, and has access to additional capacity through its relationships with over 27,000 other carriers.
New Breed is the preeminent U.S. provider of non-asset based, highly engineered contract logistics solutions for blue chip customers. Its services are concentrated in industries with high-growth outsourcing opportunities, including telecom/technology, retail/e-commerce, aerospace and defense, medical equipment and select areas of manufacturing. The main aim of the company is to grow its contract logistics platform organically by the addition of complementary acquisitions.
New Breed specializes in services for omni-channel distribution, reverse logistics, transportation management, freight bill audit and payment, lean manufacturing support, aftermarket support and supply chain optimization. It handpicks its customers in industries with high-growth outsourcing opportunities for complex supply chain requirements. New Breed processes over 275,000 orders per day - typically premium, high-value products - through 71 facilities, and employs approximately 6,800 people. After closing, XPO expects to have approximately 10,000 employees and more than 200 locations.
On July 29, 2014, the company agreed to acquire New Breed for a purchase price of $615 million on a cash-free, debt-free basis, and assuming a normalized level of working capital. At the closing, New Breed's chief executive officer, Louis DeJoy, used $30 million of proceeds from the transaction to purchase restricted stock from the company. New Breed had a revenue of approximately $597 million and adjusted EBITDA of approximately $77 million for the trailing 12 months ended June 30, 2014. The value of the transaction represents a consideration of approximately 8.0 times trailing 12 months adjusted EBITDA.
XPO will gain entry into the most desirable sector of contract logistics: customized services with solid margins, high contractual revenue renewal rates and low cyclicality. New Breed on the other hand had a non-asset based business model, which generates a high return on capital and strong free cash flow conversion. For the full year 2013, New Breed's return on invested capital was approximately 38% and free cash flow conversion was approximately 71%. The acquisition is consistent with XPO's strategy of building a broad and integrated logistics offering by acquiring leading positions in sectors where it expects sustained demand for its services. For the past 10 years, New Breed has increased revenue at a compound annual growth rate of 16%, and realized a compound annual growth rate of 19% on adjusted EBITDA. New Breed's growth is being driven by its focus on attractive customer verticals, namely technology, telecom, e-commerce, aerospace and defense, medical equipment and manufacturing.
The capabilities of both companies are complementary, and the combination is expected to create significant cross-selling opportunities. New Breed's customers are candidates for the truck brokerage, intermodal, expedite, last mile and freight forwarding services XPO offers, as are the tens of thousands of vendors that move freight in and out of New Breed facilities. In addition, many of XPO's strategic accounts utilize the kind of high-quality, customized solutions New Breed offers. Both XPO and New Breed have an intense commitment to cutting edge technology. The combination doubled XPO's IT workforce to approximately 600 talented, forward-thinking IT professionals innovating new ways to serve customers.
XPO integrated its XPO NLM expedited freight management platform with New Breed's transportation management system to offer customers highly engineered managed transportation solutions. New Breed's applications use complex modeling tools to deliver dynamic freight optimization, routing guide management, and carrier selection based on cost, service requirements, performance metrics and transit times.
Explanation / Answer
Research New Breed Logistics / XPO. Include a description of XPO or New Breed(history, growth, mission, etc.).Research the acquisition of New Breed Logistics by XPO that occurred in 2014. Include at least a one paragraph report on the acquisition, focusing on the benefits to each firm as a result of this acquisition. Be sure to connect the issues mentioned both in the company background of New Breed and in the XPO acquisition to topics we have covered in class. All sources must be appropriately cited using APA, MLA, or footnotes. Research New Breed Logistics / XPO. Include a description of XPO or New Breed(history, growth, mission, etc.).
Research the acquisition of New Breed Logistics by XPO that occurred in 2014. Include at least a one paragraph report on the acquisition, focusing on the benefits to each firm as a result of this acquisition. Be sure to connect the issues mentioned both in the company background of New Breed and in the XPO acquisition to topics we have covered in class. All sources must be appropriately cited using APA, MLA, or footnotes. Research New Breed Logistics / XPO. Include a description of XPO or New Breed(history, growth, mission, etc.).
Research the acquisition of New Breed Logistics by XPO that occurred in 2014. Include at least a one paragraph report on the acquisition, focusing on the benefits to each firm as a result of this acquisition. Be sure to connect the issues mentioned both in the company background of New Breed and in the XPO acquisition to topics we have covered in class. All sources must be appropriately cited using APA, MLA, or footnotes.
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